IBM Looks at Blockchain for Real-Time Supply Chain

IBM and global shipping giant Maersk will use blockchain for a real-time view of supply chain and associated paperwork.

While blockchain is still a bit obscure and outside the mainstream of IT thinking, proponents continue to tout its use for everything from online purchasing to tracking shipments. Oh, and also continuing to serve as the backbone of virtual currency, its original implementation.

Blockchain functions as a highly distributed database without a single administrator, built on “smart contracts” that store, manage and ensure the validity of transaction data. There’s still work to be done evangelizing the approach. Almost two in five (39 percent) of senior executives in a recent Deloitte survey indicate they had little or no knowledge about blockchain technology. Yet, many companies are also moving forward to move it well beyond its cryptocurrency roots. Forty-two percent of executives from the consumer products and manufacturing industry are planning an investment of $5 million or more in blockchain initiatives the coming calendar year.

Blockchain and supply chain: a real-time view

An intriguing area where blockchain is now starting to be applied is the global shipping business. Global trade is big business, and most of it – 90 percent – moves over the ocean. Over the past two decades, the shipping industry made some impressive strides in putting status data online, providing administrators and customers real-time or near real-time information on where ships and cargo are in the world. Now, things are ready to move on to the next step in providing real-time data by using blockchain technology.

No less than the world’s largest technology company, IBM, and the world’s largest shipping company, Maersk, have come together to put blockchain to work on tracking global shipping. The two companies announced a joint solution that “will help manage and track the paper trail of tens of millions of shipping containers across the world by digitizing the supply chain process,” according to a statement.

A wide variety of goods can be tracked through blockchain, including perishable food. A recent New York Times report documented how Walmart, one of 400 IBM customers trying out the blockchain solution, used blockchain technology to monitor shipments of lettuce, steaks, pork chops, and snack cakes – all at risk of salmonella outbreaks during shipment. “It often took weeks to trace where the bad ingredients came from,” the article notes.

The IBM-Maersk solution enables the real-time exchange of original supply chain events and documents through a digital infrastructure, or data pipeline that connects the participants in a supply chain ecosystem.

Blockchain technology also helps to mitigate the costs associated with trade documentation processing and administration, estimated to be up to one-fifth the actual physical transportation costs. “A single vessel can carry thousands of shipments, and on top of the costs to move the paperwork, the documentation to support it can be delayed, lost or misplaced, leading to further complications,” according to IBM.

How blockchain and shipping work

According to IBM:

“Blockchain, an immutable, security rich and transparent shared network, provides each participant end-to-end visibility based on their level of permission. Each participant in a supply chain ecosystem can view the progress of goods through the supply chain, understanding where a container is in transit. “

“They can also see the status of customs documents, or view bills of lading and other data. Detailed visibility of the container’s progress through the supply chain is enhanced with the real time exchange of original supply chain events and documents. No one party can modify, delete or even append any record without the consensus from others on the network.”

IBM goes on to say that “this level of transparency helps reduce fraud and errors, reduce the time products spend in the transit and shipping process, improve inventory management and ultimately reduce waste and cost.”

Shipping isn’t the only industry that will see blockchain’s impact, the Deloitte survey predicts. Forty-two percent of the surveyed executives expect to see their own industries disrupted by blockchain, and 55 percent say their competitiveness will slip if they don’t adopt it.

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About Joe McKendrick

Joe McKendrick is RTInsights' Industry Insights Editor in charge of contributed case studies. He is a regular contributor to Forbes on digital, cloud and Big Data topics. He served on the organizing committee for the recent IEEE International Conference on Edge Computing (full bio). Follow him on Twitter @joemckendrick.